Next Coast Ventures raises $310m as innovation hubs emerge

Texas-based Next Coast Ventures raised $310 million across several funds as it seeks to invest more in Texas and other emerging geographies in the US.

Next Coast raised $195 million for its flagship Next Coast Ventures III to support early-stage start-ups, $50 million for its opportunity fund NCV Select I, and $65 million for Next Coast ETA, a fund the VC set up to allow entrepreneurs to acquire and manage small- to medium-sized businesses.

Mike Smerklo, co-founder and managing director of Next Coast, said its thesis of investing in the next big cities for innovation is paying off as other cities develop robust VC ecosystems outside of the Bay Area.

“Austin is substantially ahead in catching up to the Bay Area, but we’re also seeing Miami getting there, too,” Smerklo said. “Both these cities have the elements that are required to build a robust system that works for everybody.”

Next Coast invests in areas it believes represent the country’s next innovation hubs. It primarily works with companies in Austin and central Texas, but also invests in founders in Chicago, Miami and Salt Lake City.

Smerklo said the excitement of many of its LPs, the majority of which returned to Next Coast’s fundraisings this year, proves that great companies can be built anywhere. It counts university endowments, pension funds and family offices as LPs.

“We’ve got some really great marquee companies combined with our company-building mindset,” he said. “It’s certainly aided by our focus on next-coast markets like Austin, so those factors are really coming together.”

In its first two early-stage funds, Next Coast invested and exited from several companies, including customer experience platform Tenfold and emergency-warning communications service AlertMedia, both based in Austin, and dispute-management system Chargeback, headquartered in Salt Lake City. Next Coast’s current portfolio includes diagnostic service Everly Health, 3D homebuilder ICON and mortgage platform UpEquity.

Smerklo said the strength of many of its current investments enticed the VC to start an opportunity fund.

The other fund that gained traction this year is its Next Coast ETA. The fund is managed by a separate team and provides some capital for entrepreneurs to buy other companies and build, manage and eventually exit these businesses. Smerklo said the goal of the fund is to help companies in its portfolios acquire businesses and allow for additional opportunities to become an operator.